Small Wineries Find Ally On Interstate Shipping
But States and Wholesalers Oppose Direct Selling

By Charles Lane
Washington Post Staff Writer
Sunday, December 5, 2004; Page A08


Photo:
http://tinyurl.com/3tr7c
Caption:
Virginia winemaker Juanita Swedenburg is one of the parties to the suit
seeking to overturn laws barring direct interstate wine sales. (Tracy A.
Woodward -- The Washington Post)


Supporters of interstate shipping of wine from producers to consumers see
their cause as a contest between David and Goliath: mom-and-pop wineries and
connoisseurs of the grape vs. New York, Michigan and powerful liquor
wholesalers.

But when the Supreme Court hears arguments in the case on Tuesday, the
little guys will have a heavyweight in their corner, too: billionaire Jess
Jackson, 74, the founder of the ninth-largest wine producer in the United
States, Kendall-Jackson Wineries.

Through a nonprofit organization, the Coalition for Free Trade, Jackson and
other California winemakers who espouse economic freedom -- and hope to move
more product -- have raised and spent hundreds of thousands of dollars
supporting the court challenges. The coalition hired big-name legal advisers
including former Whitewater independent counsel Kenneth W. Starr and former
Stanford law school dean Kathleen M. Sullivan. Sullivan will argue part of
the case before the justices.

"Jess Jackson carried a lot of weight out there. He sits atop
Kendall-Jackson, which along with Gallo is one of the big boys," said James
A. Tanford, a law professor at Indiana University who filed the first
lawsuit in 1998 and works closely with the Coalition for Free Trade. "When
he speaks, people in the California wine business listen."

As the role of Jackson and his allies shows, the wine case is not only a
clash of constitutional principles, but also an effort by businesses to win
in court what they were denied in state legislatures.

This is a variation on a recent theme at the Supreme Court. In 2002, the
health insurance industry asked the court to strike down state laws giving
patients an independent review of benefits denials. The court said no. But
in 2004, the insurers persuaded the court to strike down state laws that
created a right to sue managed-care companies for medical malpractice.

Jackson keeps a low profile and holds no formal position in the Coalition
for Free Trade; he declined a request for an interview. But people familiar
with the case describe him as a key player behind the legal effort that has
led to Tuesday's argument.

Retail wine sales total about $20 billion per year, according to MKF Group,
an economic consulting firm in St. Helena, Calif. The top three producers
account for 60 percent of wine sold, but in recent years small,
family-operated wineries have proliferated. The number of wineries in the
United States has gone from 500 to 800 in 1975 to well over 2,000 now,
according to the Federal Trade Commission. Wineries have opened in all 50
states.

Yet the wine trade is governed by a regulatory system from the 1930s.

The 21st Amendment, which repealed Prohibition in 1933, gave states the
power to tax and control the flow of alcoholic beverages within and across
their borders. Most set up a "three-tier" system: a state-licensed
wholesaler brought in beer, wine and spirits; state-licensed retailers sold
them to customers; and customers drank.

Over time, the system has given rise to a consolidated wholesale business
dominated by a few companies that control producers' access to liquor store
shelves.

But in the late 1990s, some small winemakers began selling over the
Internet. For high-end wineries too small to crack the wholesalers'
distribution networks, such sales were a way to maintain customers who had
come in contact with them, often on vineyard tours.

Wholesalers saw these sales, still a tiny percentage of the total market, as
a threat to the three-tier system. Fearing what would happen if bigger
producers got into the act, the wholesalers lobbied state legislatures for a
crackdown.

All told, 24 states -- including New York and Florida, the second- and
third-largest wine-consuming states, after California -- ban direct shipping
from out of state. In five states, including Maryland and Florida, it is a
felony.

But some of the laws, including the Michigan and New York laws at issue
Tuesday, permit in-state wineries to sell directly to consumers. (New York
lets out-of-state wineries ship directly if they set up an office in New
York.)

The states and the wholesalers argue that the laws are needed to keep
alcohol away from minors and help collect tax revenue. Michigan, for
example, collected $168.3 million from liquor taxes, license fees, fines and
penalties in 2003.

And this is constitutional, they argue, because the 21st Amendment was
intended as an exception to the usual rule of free interstate trade.

In their brief, Michigan wholesalers warn the court bluntly that "this case
would challenge the whole three-tier system."

"This isn't about access to wine; this is about state control of the
regulatory system," said M. Craig Wolf, general counsel of the Wine and
Spirits Wholesalers of America.

Wolf noted that, in a separate case, Costco is suing in a Washington state
federal court for the right to import wine directly from California to its
stores. Together, Costco, Sam's Club and Trader Joe's accounted for more
than $1 billion in wine sales last year, according to ACNielsen.
Kendall-Jackson wines are among the most popular on Costco's shelves,
according to industry sources.

But the wineries and wine drinkers point to a 2003 Federal Trade Commission
report that said that consumers reap significant benefits from direct
shipment in the states that permit it and that those states report few
problems with tax collection or underage purchases.

Opponents of the bans on direct interstate shipments say the fact that
Michigan and New York let their in-state producers ship to consumers proves
their laws do nothing more than protect local businesses from competition.

That makes them unconstitutional, opponents say, because when the framers of
the Constitution gave Congress the power to regulate interstate commerce,
they implicitly denied it to the states.

"This is the latest round in a battle that has been raging longer than the
republic has been around," said Clint Bolick, a lawyer who will represent
Middleburg, Va., winemaker Juanita Swedenburg on Tuesday. "The battle
between economic protectionism and free trade."

Bolick is counsel for strategic litigation at the Institute for Justice, a
libertarian legal group, which received no funds from the Coalition for Free
Trade.

Tanford was the first to test the opponents' constitutional argument in
court, filing suit in Indiana in 1998 on behalf of Russell Bridenbaugh, a
wine critic in Indiana who found that he could no longer receive free review
bottles of wine from out-of-state wineries.

Though the Indianan lost his case at the U.S. Court of Appeals for the 7th
Circuit, his effort attracted Jackson's attention and, eventually, his
support. Soon the Coalition for Free Trade was offering technical advice to
plaintiffs in Florida, North Carolina and Michigan and filing
friend-of-the-court briefs.

"As we saw the effort underway, we jumped in as an industry to become a
central, important part of it," said Tracy K. Genesen, legal director of the
coalition. The group is not out to overthrow the three-tier system, she
said, but Jackson "has a vision where you have a complement, or an
augmentation, to the three-tier system that will benefit all size wineries."

Starr and his colleagues at the law firm of Kirkland & Ellis, followed by
Sullivan, helped the plaintiffs match the wholesalers' high-priced legal
talent, which includes such prominent names as former federal judge Robert
H. Bork and former White House counsel C. Boyden Gray.

According to its 2002 federal tax statement, the most recent available, the
Coalition for Free Trade spent more than $1.1 million between 1998 and 2001.
It is seeking an additional $700,000 in donations, according to W. Reed
Foster, its president.

In the wine industry, Jackson's decision to back litigation was seen as
risky and, by some, as courageous. Many other winemakers feared retaliation
from wholesalers.

The biggest name in the wine business publicly supported the Indiana state
law at the 7th Circuit. E.&J. Gallo Winery, with an estimated $3 billion per
year in retail sales, according to MKF Group, filed a friend-of-the-court
brief defending the statute -- a move that was widely seen as a reflection
of Gallo's good relationships with the wholesalers.

Gallo has filed no other briefs. Asked the company's position on the Supreme
Court case -- Granholm v. Heald, MI Beer & Wine Wholesalers v. Heald and
Swedenburg v. Kelly, 03-1116, 03-1120 and 03-1274 -- Gallo spokesman John
Segale said: "We believe this is an issue that needs to be resolved by the
court, and we will live with whatever decision they reach."

A strong-willed lawyer with a libertarian streak, Jackson started
Kendall-Jackson 22 years ago, building an empire out of sweet Chardonnay.
Although Forbes estimated the company's sales at $450 million in 2003,
Jackson empathizes with smaller winemakers, associates said.

Also, Jackson had already fought and beaten a powerful Midwest wholesaler,
Judge & Dolph, in an unrelated federal case. Judge & Dolph is controlled by
William W. Wirtz, who also owns the Chicago Blackhawks hockey team and
Chicago's United Center.

Jackson "does what's good for the company, and direct shipping is good for
the company. He's not afraid of anybody," coalition president Foster said.


http://www.washingtonpost.com/wp-dyn...-2004Dec4.html

good post!

thanks

"Kuacou" > wrote in message
...
> Small Wineries Find Ally On Interstate Shipping
> But States and Wholesalers Oppose Direct Selling
>
> By Charles Lane
> Washington Post Staff Writer
> Sunday, December 5, 2004; Page A08
>
>
> Photo:
> http://tinyurl.com/3tr7c
> Caption:
> Virginia winemaker Juanita Swedenburg is one of the parties to the suit
> seeking to overturn laws barring direct interstate wine sales. (Tracy A.
> Woodward -- The Washington Post)
>
>
> Supporters of interstate shipping of wine from producers to consumers see
> their cause as a contest between David and Goliath: mom-and-pop wineries
> and
> connoisseurs of the grape vs. New York, Michigan and powerful liquor
> wholesalers.
>
> But when the Supreme Court hears arguments in the case on Tuesday, the
> little guys will have a heavyweight in their corner, too: billionaire Jess
> Jackson, 74, the founder of the ninth-largest wine producer in the United
> States, Kendall-Jackson Wineries.
>
> Through a nonprofit organization, the Coalition for Free Trade, Jackson
> and
> other California winemakers who espouse economic freedom -- and hope to
> move
> more product -- have raised and spent hundreds of thousands of dollars
> supporting the court challenges. The coalition hired big-name legal
> advisers
> including former Whitewater independent counsel Kenneth W. Starr and
> former
> Stanford law school dean Kathleen M. Sullivan. Sullivan will argue part of
> the case before the justices.
>
> "Jess Jackson carried a lot of weight out there. He sits atop
> Kendall-Jackson, which along with Gallo is one of the big boys," said
> James
> A. Tanford, a law professor at Indiana University who filed the first
> lawsuit in 1998 and works closely with the Coalition for Free Trade. "When
> he speaks, people in the California wine business listen."
>
> As the role of Jackson and his allies shows, the wine case is not only a
> clash of constitutional principles, but also an effort by businesses to
> win
> in court what they were denied in state legislatures.
>
> This is a variation on a recent theme at the Supreme Court. In 2002, the
> health insurance industry asked the court to strike down state laws giving
> patients an independent review of benefits denials. The court said no. But
> in 2004, the insurers persuaded the court to strike down state laws that
> created a right to sue managed-care companies for medical malpractice.
>
> Jackson keeps a low profile and holds no formal position in the Coalition
> for Free Trade; he declined a request for an interview. But people
> familiar
> with the case describe him as a key player behind the legal effort that
> has
> led to Tuesday's argument.
>
> Retail wine sales total about $20 billion per year, according to MKF
> Group,
> an economic consulting firm in St. Helena, Calif. The top three producers
> account for 60 percent of wine sold, but in recent years small,
> family-operated wineries have proliferated. The number of wineries in the
> United States has gone from 500 to 800 in 1975 to well over 2,000 now,
> according to the Federal Trade Commission. Wineries have opened in all 50
> states.
>
> Yet the wine trade is governed by a regulatory system from the 1930s.
>
> The 21st Amendment, which repealed Prohibition in 1933, gave states the
> power to tax and control the flow of alcoholic beverages within and across
> their borders. Most set up a "three-tier" system: a state-licensed
> wholesaler brought in beer, wine and spirits; state-licensed retailers
> sold
> them to customers; and customers drank.
>
> Over time, the system has given rise to a consolidated wholesale business
> dominated by a few companies that control producers' access to liquor
> store
> shelves.
>
> But in the late 1990s, some small winemakers began selling over the
> Internet. For high-end wineries too small to crack the wholesalers'
> distribution networks, such sales were a way to maintain customers who had
> come in contact with them, often on vineyard tours.
>
> Wholesalers saw these sales, still a tiny percentage of the total market,
> as
> a threat to the three-tier system. Fearing what would happen if bigger
> producers got into the act, the wholesalers lobbied state legislatures for
> a
> crackdown.
>
> All told, 24 states -- including New York and Florida, the second- and
> third-largest wine-consuming states, after California -- ban direct
> shipping
> from out of state. In five states, including Maryland and Florida, it is a
> felony.
>
> But some of the laws, including the Michigan and New York laws at issue
> Tuesday, permit in-state wineries to sell directly to consumers. (New York
> lets out-of-state wineries ship directly if they set up an office in New
> York.)
>
> The states and the wholesalers argue that the laws are needed to keep
> alcohol away from minors and help collect tax revenue. Michigan, for
> example, collected $168.3 million from liquor taxes, license fees, fines
> and
> penalties in 2003.
>
> And this is constitutional, they argue, because the 21st Amendment was
> intended as an exception to the usual rule of free interstate trade.
>
> In their brief, Michigan wholesalers warn the court bluntly that "this
> case
> would challenge the whole three-tier system."
>
> "This isn't about access to wine; this is about state control of the
> regulatory system," said M. Craig Wolf, general counsel of the Wine and
> Spirits Wholesalers of America.
>
> Wolf noted that, in a separate case, Costco is suing in a Washington state
> federal court for the right to import wine directly from California to its
> stores. Together, Costco, Sam's Club and Trader Joe's accounted for more
> than $1 billion in wine sales last year, according to ACNielsen.
> Kendall-Jackson wines are among the most popular on Costco's shelves,
> according to industry sources.
>
> But the wineries and wine drinkers point to a 2003 Federal Trade
> Commission
> report that said that consumers reap significant benefits from direct
> shipment in the states that permit it and that those states report few
> problems with tax collection or underage purchases.
>
> Opponents of the bans on direct interstate shipments say the fact that
> Michigan and New York let their in-state producers ship to consumers
> proves
> their laws do nothing more than protect local businesses from competition.
>
> That makes them unconstitutional, opponents say, because when the framers
> of
> the Constitution gave Congress the power to regulate interstate commerce,
> they implicitly denied it to the states.
>
> "This is the latest round in a battle that has been raging longer than the
> republic has been around," said Clint Bolick, a lawyer who will represent
> Middleburg, Va., winemaker Juanita Swedenburg on Tuesday. "The battle
> between economic protectionism and free trade."
>
> Bolick is counsel for strategic litigation at the Institute for Justice, a
> libertarian legal group, which received no funds from the Coalition for
> Free
> Trade.
>
> Tanford was the first to test the opponents' constitutional argument in
> court, filing suit in Indiana in 1998 on behalf of Russell Bridenbaugh, a
> wine critic in Indiana who found that he could no longer receive free
> review
> bottles of wine from out-of-state wineries.
>
> Though the Indianan lost his case at the U.S. Court of Appeals for the 7th
> Circuit, his effort attracted Jackson's attention and, eventually, his
> support. Soon the Coalition for Free Trade was offering technical advice
> to
> plaintiffs in Florida, North Carolina and Michigan and filing
> friend-of-the-court briefs.
>
> "As we saw the effort underway, we jumped in as an industry to become a
> central, important part of it," said Tracy K. Genesen, legal director of
> the
> coalition. The group is not out to overthrow the three-tier system, she
> said, but Jackson "has a vision where you have a complement, or an
> augmentation, to the three-tier system that will benefit all size
> wineries."
>
> Starr and his colleagues at the law firm of Kirkland & Ellis, followed by
> Sullivan, helped the plaintiffs match the wholesalers' high-priced legal
> talent, which includes such prominent names as former federal judge Robert
> H. Bork and former White House counsel C. Boyden Gray.
>
> According to its 2002 federal tax statement, the most recent available,
> the
> Coalition for Free Trade spent more than $1.1 million between 1998 and
> 2001.
> It is seeking an additional $700,000 in donations, according to W. Reed
> Foster, its president.
>
> In the wine industry, Jackson's decision to back litigation was seen as
> risky and, by some, as courageous. Many other winemakers feared
> retaliation
> from wholesalers.
>
> The biggest name in the wine business publicly supported the Indiana state
> law at the 7th Circuit. E.&J. Gallo Winery, with an estimated $3 billion
> per
> year in retail sales, according to MKF Group, filed a friend-of-the-court
> brief defending the statute -- a move that was widely seen as a reflection
> of Gallo's good relationships with the wholesalers.
>
> Gallo has filed no other briefs. Asked the company's position on the
> Supreme
> Court case -- Granholm v. Heald, MI Beer & Wine Wholesalers v. Heald and
> Swedenburg v. Kelly, 03-1116, 03-1120 and 03-1274 -- Gallo spokesman John
> Segale said: "We believe this is an issue that needs to be resolved by the
> court, and we will live with whatever decision they reach."
>
> A strong-willed lawyer with a libertarian streak, Jackson started
> Kendall-Jackson 22 years ago, building an empire out of sweet Chardonnay.
> Although Forbes estimated the company's sales at $450 million in 2003,
> Jackson empathizes with smaller winemakers, associates said.
>
> Also, Jackson had already fought and beaten a powerful Midwest wholesaler,
> Judge & Dolph, in an unrelated federal case. Judge & Dolph is controlled
> by
> William W. Wirtz, who also owns the Chicago Blackhawks hockey team and
> Chicago's United Center.
>
> Jackson "does what's good for the company, and direct shipping is good for
> the company. He's not afraid of anybody," coalition president Foster said.
>
>
> http://www.washingtonpost.com/wp-dyn...-2004Dec4.html
>
>

Justices Hear Dispute Over Interstate Wine Sales

By Charles Lane
Washington Post Staff Writer
Wednesday, December 8, 2004; Page A06

Winemakers who want to ship directly to consumers across state lines got a
sympathetic hearing at the Supreme Court yesterday, as the justices
considered oral arguments in what could be the most significant test of
states' constitutional power to regulate the alcohol trade since
Prohibition.

At issue are New York and Michigan laws that require out-of-state wineries
to sell through state-licensed wholesalers, while permitting in-state
wineries to deal directly with individuals. The small Virginia winery
challenging the New York law and the wine journalists, California winery and
wine connoisseurs challenging the Michigan law say that the statutes are
discriminatory and violate the Constitution's implicit ban on state trade
protectionism.

The states, backed by wholesalers, say that the 21st Amendment, which
repealed Prohibition in 1933, permits such laws. It bars importing alcohol
into any state "in violation of the laws thereof."

But Justice Antonin Scalia seemed to reject that assertion when New York
State Solicitor Caitlin J. Halligan raised it yesterday, telling her: "I
don't think so. I think when you have facial discrimination, the bar's a
little higher than that."

Justice Stephen G. Breyer told Michigan's solicitor general, Thomas L.
Casey, "there's not a word" in the history of the 21st Amendment to suggest
it was "intended to permit discrimination."

And Justice Ruth Bader Ginsburg cited a 1984 decision of the court that
struck down a Hawaii tax that applied only to imported alcohol. "One thing
is certain," Ginsburg read. "The central purpose of [the 21st Amendment] was
not to empower states to favor local liquor industries by erecting barriers
to competition."

Perhaps most encouraging for the winemakers and wine drinkers, Justice
Sandra Day O'Connor, who dissented from the 1984 ruling, seemed willing to
apply it to this case, telling the states' lawyers repeatedly that it "cuts
against you."

The justices seemed especially skeptical of the states' assertions that they
may treat out-of-state wine differently because it is easier to enforce
drinking-age and tax laws against in-state companies -- and that those laws
are crucial to limiting the harm caused by excessive drinking. Almost
nothing the states' lawyers said in this regard seemed to convince the
court.

"Michigan's laws do promote the state's interest in temperance," Casey said.

Justice David H. Souter cut him off, asking: "You say that -- but how?"

When Casey suggested that Michigan controls sellers of wine through
licensing, Souter responded that the state could require out-of-state
wineries to post their business records online, password-protected, where
they could be monitored by the state.

New York does permit out-of-state wineries to sell directly to consumers if
they establish an office in the state. But, to Scalia, that just proved the
state's rationale for its law was insincere.

He asked Halligan how having an office would help prevent the wineries from
selling wine to minors or evading taxes. But before she could finish her
answer, he shot back, "It doesn't help them at all."

"Your honor, it's a deterrent," Halligan insisted.

The origins of the case lie in the rise of hundreds of new family-run
wineries in recent years, coupled with the advent of the Internet. Too small
to gain access to the distribution networks run by state-licensed
wholesalers, some family wineries began selling online. Fearing the erosion
of their market control, wholesalers lobbied state legislatures to toughen
the rules against direct shipping.

All told, 24 states -- including New York and Florida, the second- and
third-largest wine-consuming states, after California -- ban direct shipping
from out of state. In five states, including Maryland and Florida, it is a
felony.

Yesterday's argument was not entirely one-sided. Some justices, while
sympathetic to the argument in favor of direct shipping, expressed concern
that it might lead to a general erosion of state control over sales not only
of wine but also beer and spirits.

"Your case is very narrow, but your rationale is very sweeping," Justice
Anthony M. Kennedy told former Stanford law school dean Kathleen Sullivan,
who was representing the group of wine journalists and connoisseurs
challenging Michigan's law.

Sullivan replied that the states and wholesalers were the ones making a
sweeping argument, because "they are saying that if you wanted to bar all
California wines you could do that."

The cases are Granholm v. Heald, No. 03-1116, Michigan Beer & Wine
Wholesalers Association v. Heald, No. 03-1120 and Swedenburg v. Kelly, No.
03-1274. A decision is expected by July.


http://www.washingtonpost.com/wp-dyn...-2004Dec7.html

I run www.cleanskins.com in Australia. We sell unlabelled "cleanskin" wines
from wineries direct to public - online. We onlu\y deliver to Australian
Address's at this stage. I am very interested in progress of this case.

What is the likely outcome ??

James Horne

"Richard Neidich" > wrote in message
ink.net...
> good post!
>
> thanks
>
> "Kuacou" > wrote in message
> ...
>> Small Wineries Find Ally On Interstate Shipping
>> But States and Wholesalers Oppose Direct Selling
>>
>> By Charles Lane
>> Washington Post Staff Writer
>> Sunday, December 5, 2004; Page A08
>>
>>
>> Photo:
>> http://tinyurl.com/3tr7c
>> Caption:
>> Virginia winemaker Juanita Swedenburg is one of the parties to the suit
>> seeking to overturn laws barring direct interstate wine sales. (Tracy A.
>> Woodward -- The Washington Post)
>>
>>
>> Supporters of interstate shipping of wine from producers to consumers see
>> their cause as a contest between David and Goliath: mom-and-pop wineries
>> and
>> connoisseurs of the grape vs. New York, Michigan and powerful liquor
>> wholesalers.
>>
>> But when the Supreme Court hears arguments in the case on Tuesday, the
>> little guys will have a heavyweight in their corner, too: billionaire
>> Jess
>> Jackson, 74, the founder of the ninth-largest wine producer in the United
>> States, Kendall-Jackson Wineries.
>>
>> Through a nonprofit organization, the Coalition for Free Trade, Jackson
>> and
>> other California winemakers who espouse economic freedom -- and hope to
>> move
>> more product -- have raised and spent hundreds of thousands of dollars
>> supporting the court challenges. The coalition hired big-name legal
>> advisers
>> including former Whitewater independent counsel Kenneth W. Starr and
>> former
>> Stanford law school dean Kathleen M. Sullivan. Sullivan will argue part
>> of
>> the case before the justices.
>>
>> "Jess Jackson carried a lot of weight out there. He sits atop
>> Kendall-Jackson, which along with Gallo is one of the big boys," said
>> James
>> A. Tanford, a law professor at Indiana University who filed the first
>> lawsuit in 1998 and works closely with the Coalition for Free Trade.
>> "When
>> he speaks, people in the California wine business listen."
>>
>> As the role of Jackson and his allies shows, the wine case is not only a
>> clash of constitutional principles, but also an effort by businesses to
>> win
>> in court what they were denied in state legislatures.
>>
>> This is a variation on a recent theme at the Supreme Court. In 2002, the
>> health insurance industry asked the court to strike down state laws
>> giving
>> patients an independent review of benefits denials. The court said no.
>> But
>> in 2004, the insurers persuaded the court to strike down state laws that
>> created a right to sue managed-care companies for medical malpractice.
>>
>> Jackson keeps a low profile and holds no formal position in the Coalition
>> for Free Trade; he declined a request for an interview. But people
>> familiar
>> with the case describe him as a key player behind the legal effort that
>> has
>> led to Tuesday's argument.
>>
>> Retail wine sales total about $20 billion per year, according to MKF
>> Group,
>> an economic consulting firm in St. Helena, Calif. The top three producers
>> account for 60 percent of wine sold, but in recent years small,
>> family-operated wineries have proliferated. The number of wineries in the
>> United States has gone from 500 to 800 in 1975 to well over 2,000 now,
>> according to the Federal Trade Commission. Wineries have opened in all 50
>> states.
>>
>> Yet the wine trade is governed by a regulatory system from the 1930s.
>>
>> The 21st Amendment, which repealed Prohibition in 1933, gave states the
>> power to tax and control the flow of alcoholic beverages within and
>> across
>> their borders. Most set up a "three-tier" system: a state-licensed
>> wholesaler brought in beer, wine and spirits; state-licensed retailers
>> sold
>> them to customers; and customers drank.
>>
>> Over time, the system has given rise to a consolidated wholesale business
>> dominated by a few companies that control producers' access to liquor
>> store
>> shelves.
>>
>> But in the late 1990s, some small winemakers began selling over the
>> Internet. For high-end wineries too small to crack the wholesalers'
>> distribution networks, such sales were a way to maintain customers who
>> had
>> come in contact with them, often on vineyard tours.
>>
>> Wholesalers saw these sales, still a tiny percentage of the total market,
>> as
>> a threat to the three-tier system. Fearing what would happen if bigger
>> producers got into the act, the wholesalers lobbied state legislatures
>> for a
>> crackdown.
>>
>> All told, 24 states -- including New York and Florida, the second- and
>> third-largest wine-consuming states, after California -- ban direct
>> shipping
>> from out of state. In five states, including Maryland and Florida, it is
>> a
>> felony.
>>
>> But some of the laws, including the Michigan and New York laws at issue
>> Tuesday, permit in-state wineries to sell directly to consumers. (New
>> York
>> lets out-of-state wineries ship directly if they set up an office in New
>> York.)
>>
>> The states and the wholesalers argue that the laws are needed to keep
>> alcohol away from minors and help collect tax revenue. Michigan, for
>> example, collected $168.3 million from liquor taxes, license fees, fines
>> and
>> penalties in 2003.
>>
>> And this is constitutional, they argue, because the 21st Amendment was
>> intended as an exception to the usual rule of free interstate trade.
>>
>> In their brief, Michigan wholesalers warn the court bluntly that "this
>> case
>> would challenge the whole three-tier system."
>>
>> "This isn't about access to wine; this is about state control of the
>> regulatory system," said M. Craig Wolf, general counsel of the Wine and
>> Spirits Wholesalers of America.
>>
>> Wolf noted that, in a separate case, Costco is suing in a Washington
>> state
>> federal court for the right to import wine directly from California to
>> its
>> stores. Together, Costco, Sam's Club and Trader Joe's accounted for more
>> than $1 billion in wine sales last year, according to ACNielsen.
>> Kendall-Jackson wines are among the most popular on Costco's shelves,
>> according to industry sources.
>>
>> But the wineries and wine drinkers point to a 2003 Federal Trade
>> Commission
>> report that said that consumers reap significant benefits from direct
>> shipment in the states that permit it and that those states report few
>> problems with tax collection or underage purchases.
>>
>> Opponents of the bans on direct interstate shipments say the fact that
>> Michigan and New York let their in-state producers ship to consumers
>> proves
>> their laws do nothing more than protect local businesses from
>> competition.
>>
>> That makes them unconstitutional, opponents say, because when the framers
>> of
>> the Constitution gave Congress the power to regulate interstate commerce,
>> they implicitly denied it to the states.
>>
>> "This is the latest round in a battle that has been raging longer than
>> the
>> republic has been around," said Clint Bolick, a lawyer who will represent
>> Middleburg, Va., winemaker Juanita Swedenburg on Tuesday. "The battle
>> between economic protectionism and free trade."
>>
>> Bolick is counsel for strategic litigation at the Institute for Justice,
>> a
>> libertarian legal group, which received no funds from the Coalition for
>> Free
>> Trade.
>>
>> Tanford was the first to test the opponents' constitutional argument in
>> court, filing suit in Indiana in 1998 on behalf of Russell Bridenbaugh, a
>> wine critic in Indiana who found that he could no longer receive free
>> review
>> bottles of wine from out-of-state wineries.
>>
>> Though the Indianan lost his case at the U.S. Court of Appeals for the
>> 7th
>> Circuit, his effort attracted Jackson's attention and, eventually, his
>> support. Soon the Coalition for Free Trade was offering technical advice
>> to
>> plaintiffs in Florida, North Carolina and Michigan and filing
>> friend-of-the-court briefs.
>>
>> "As we saw the effort underway, we jumped in as an industry to become a
>> central, important part of it," said Tracy K. Genesen, legal director of
>> the
>> coalition. The group is not out to overthrow the three-tier system, she
>> said, but Jackson "has a vision where you have a complement, or an
>> augmentation, to the three-tier system that will benefit all size
>> wineries."
>>
>> Starr and his colleagues at the law firm of Kirkland & Ellis, followed by
>> Sullivan, helped the plaintiffs match the wholesalers' high-priced legal
>> talent, which includes such prominent names as former federal judge
>> Robert
>> H. Bork and former White House counsel C. Boyden Gray.
>>
>> According to its 2002 federal tax statement, the most recent available,
>> the
>> Coalition for Free Trade spent more than $1.1 million between 1998 and
>> 2001.
>> It is seeking an additional $700,000 in donations, according to W. Reed
>> Foster, its president.
>>
>> In the wine industry, Jackson's decision to back litigation was seen as
>> risky and, by some, as courageous. Many other winemakers feared
>> retaliation
>> from wholesalers.
>>
>> The biggest name in the wine business publicly supported the Indiana
>> state
>> law at the 7th Circuit. E.&J. Gallo Winery, with an estimated $3 billion
>> per
>> year in retail sales, according to MKF Group, filed a friend-of-the-court
>> brief defending the statute -- a move that was widely seen as a
>> reflection
>> of Gallo's good relationships with the wholesalers.
>>
>> Gallo has filed no other briefs. Asked the company's position on the
>> Supreme
>> Court case -- Granholm v. Heald, MI Beer & Wine Wholesalers v. Heald and
>> Swedenburg v. Kelly, 03-1116, 03-1120 and 03-1274 -- Gallo spokesman John
>> Segale said: "We believe this is an issue that needs to be resolved by
>> the
>> court, and we will live with whatever decision they reach."
>>
>> A strong-willed lawyer with a libertarian streak, Jackson started
>> Kendall-Jackson 22 years ago, building an empire out of sweet Chardonnay.
>> Although Forbes estimated the company's sales at $450 million in 2003,
>> Jackson empathizes with smaller winemakers, associates said.
>>
>> Also, Jackson had already fought and beaten a powerful Midwest
>> wholesaler,
>> Judge & Dolph, in an unrelated federal case. Judge & Dolph is controlled
>> by
>> William W. Wirtz, who also owns the Chicago Blackhawks hockey team and
>> Chicago's United Center.
>>
>> Jackson "does what's good for the company, and direct shipping is good
>> for
>> the company. He's not afraid of anybody," coalition president Foster
>> said.
>>
>>
>> http://www.washingtonpost.com/wp-dyn...-2004Dec4.html
>>
>>
>
>

I run www.cleanskins.com in Australia. We sell unlabelled "cleanskin" wines
from wineries direct to public - online. We onlu\y deliver to Australian
Address's at this stage. I am very interested in progress of this case.

What is the likely outcome ??

James Horne

"Richard Neidich" > wrote in message
ink.net...
> good post!
>
> thanks
>
> "Kuacou" > wrote in message
> ...
>> Small Wineries Find Ally On Interstate Shipping
>> But States and Wholesalers Oppose Direct Selling
>>
>> By Charles Lane
>> Washington Post Staff Writer
>> Sunday, December 5, 2004; Page A08
>>
>>
>> Photo:
>> http://tinyurl.com/3tr7c
>> Caption:
>> Virginia winemaker Juanita Swedenburg is one of the parties to the suit
>> seeking to overturn laws barring direct interstate wine sales. (Tracy A.
>> Woodward -- The Washington Post)
>>
>>
>> Supporters of interstate shipping of wine from producers to consumers see
>> their cause as a contest between David and Goliath: mom-and-pop wineries
>> and
>> connoisseurs of the grape vs. New York, Michigan and powerful liquor
>> wholesalers.
>>
>> But when the Supreme Court hears arguments in the case on Tuesday, the
>> little guys will have a heavyweight in their corner, too: billionaire
>> Jess
>> Jackson, 74, the founder of the ninth-largest wine producer in the United
>> States, Kendall-Jackson Wineries.
>>
>> Through a nonprofit organization, the Coalition for Free Trade, Jackson
>> and
>> other California winemakers who espouse economic freedom -- and hope to
>> move
>> more product -- have raised and spent hundreds of thousands of dollars
>> supporting the court challenges. The coalition hired big-name legal
>> advisers
>> including former Whitewater independent counsel Kenneth W. Starr and
>> former
>> Stanford law school dean Kathleen M. Sullivan. Sullivan will argue part
>> of
>> the case before the justices.
>>
>> "Jess Jackson carried a lot of weight out there. He sits atop
>> Kendall-Jackson, which along with Gallo is one of the big boys," said
>> James
>> A. Tanford, a law professor at Indiana University who filed the first
>> lawsuit in 1998 and works closely with the Coalition for Free Trade.
>> "When
>> he speaks, people in the California wine business listen."
>>
>> As the role of Jackson and his allies shows, the wine case is not only a
>> clash of constitutional principles, but also an effort by businesses to
>> win
>> in court what they were denied in state legislatures.
>>
>> This is a variation on a recent theme at the Supreme Court. In 2002, the
>> health insurance industry asked the court to strike down state laws
>> giving
>> patients an independent review of benefits denials. The court said no.
>> But
>> in 2004, the insurers persuaded the court to strike down state laws that
>> created a right to sue managed-care companies for medical malpractice.
>>
>> Jackson keeps a low profile and holds no formal position in the Coalition
>> for Free Trade; he declined a request for an interview. But people
>> familiar
>> with the case describe him as a key player behind the legal effort that
>> has
>> led to Tuesday's argument.
>>
>> Retail wine sales total about $20 billion per year, according to MKF
>> Group,
>> an economic consulting firm in St. Helena, Calif. The top three producers
>> account for 60 percent of wine sold, but in recent years small,
>> family-operated wineries have proliferated. The number of wineries in the
>> United States has gone from 500 to 800 in 1975 to well over 2,000 now,
>> according to the Federal Trade Commission. Wineries have opened in all 50
>> states.
>>
>> Yet the wine trade is governed by a regulatory system from the 1930s.
>>
>> The 21st Amendment, which repealed Prohibition in 1933, gave states the
>> power to tax and control the flow of alcoholic beverages within and
>> across
>> their borders. Most set up a "three-tier" system: a state-licensed
>> wholesaler brought in beer, wine and spirits; state-licensed retailers
>> sold
>> them to customers; and customers drank.
>>
>> Over time, the system has given rise to a consolidated wholesale business
>> dominated by a few companies that control producers' access to liquor
>> store
>> shelves.
>>
>> But in the late 1990s, some small winemakers began selling over the
>> Internet. For high-end wineries too small to crack the wholesalers'
>> distribution networks, such sales were a way to maintain customers who
>> had
>> come in contact with them, often on vineyard tours.
>>
>> Wholesalers saw these sales, still a tiny percentage of the total market,
>> as
>> a threat to the three-tier system. Fearing what would happen if bigger
>> producers got into the act, the wholesalers lobbied state legislatures
>> for a
>> crackdown.
>>
>> All told, 24 states -- including New York and Florida, the second- and
>> third-largest wine-consuming states, after California -- ban direct
>> shipping
>> from out of state. In five states, including Maryland and Florida, it is
>> a
>> felony.
>>
>> But some of the laws, including the Michigan and New York laws at issue
>> Tuesday, permit in-state wineries to sell directly to consumers. (New
>> York
>> lets out-of-state wineries ship directly if they set up an office in New
>> York.)
>>
>> The states and the wholesalers argue that the laws are needed to keep
>> alcohol away from minors and help collect tax revenue. Michigan, for
>> example, collected $168.3 million from liquor taxes, license fees, fines
>> and
>> penalties in 2003.
>>
>> And this is constitutional, they argue, because the 21st Amendment was
>> intended as an exception to the usual rule of free interstate trade.
>>
>> In their brief, Michigan wholesalers warn the court bluntly that "this
>> case
>> would challenge the whole three-tier system."
>>
>> "This isn't about access to wine; this is about state control of the
>> regulatory system," said M. Craig Wolf, general counsel of the Wine and
>> Spirits Wholesalers of America.
>>
>> Wolf noted that, in a separate case, Costco is suing in a Washington
>> state
>> federal court for the right to import wine directly from California to
>> its
>> stores. Together, Costco, Sam's Club and Trader Joe's accounted for more
>> than $1 billion in wine sales last year, according to ACNielsen.
>> Kendall-Jackson wines are among the most popular on Costco's shelves,
>> according to industry sources.
>>
>> But the wineries and wine drinkers point to a 2003 Federal Trade
>> Commission
>> report that said that consumers reap significant benefits from direct
>> shipment in the states that permit it and that those states report few
>> problems with tax collection or underage purchases.
>>
>> Opponents of the bans on direct interstate shipments say the fact that
>> Michigan and New York let their in-state producers ship to consumers
>> proves
>> their laws do nothing more than protect local businesses from
>> competition.
>>
>> That makes them unconstitutional, opponents say, because when the framers
>> of
>> the Constitution gave Congress the power to regulate interstate commerce,
>> they implicitly denied it to the states.
>>
>> "This is the latest round in a battle that has been raging longer than
>> the
>> republic has been around," said Clint Bolick, a lawyer who will represent
>> Middleburg, Va., winemaker Juanita Swedenburg on Tuesday. "The battle
>> between economic protectionism and free trade."
>>
>> Bolick is counsel for strategic litigation at the Institute for Justice,
>> a
>> libertarian legal group, which received no funds from the Coalition for
>> Free
>> Trade.
>>
>> Tanford was the first to test the opponents' constitutional argument in
>> court, filing suit in Indiana in 1998 on behalf of Russell Bridenbaugh, a
>> wine critic in Indiana who found that he could no longer receive free
>> review
>> bottles of wine from out-of-state wineries.
>>
>> Though the Indianan lost his case at the U.S. Court of Appeals for the
>> 7th
>> Circuit, his effort attracted Jackson's attention and, eventually, his
>> support. Soon the Coalition for Free Trade was offering technical advice
>> to
>> plaintiffs in Florida, North Carolina and Michigan and filing
>> friend-of-the-court briefs.
>>
>> "As we saw the effort underway, we jumped in as an industry to become a
>> central, important part of it," said Tracy K. Genesen, legal director of
>> the
>> coalition. The group is not out to overthrow the three-tier system, she
>> said, but Jackson "has a vision where you have a complement, or an
>> augmentation, to the three-tier system that will benefit all size
>> wineries."
>>
>> Starr and his colleagues at the law firm of Kirkland & Ellis, followed by
>> Sullivan, helped the plaintiffs match the wholesalers' high-priced legal
>> talent, which includes such prominent names as former federal judge
>> Robert
>> H. Bork and former White House counsel C. Boyden Gray.
>>
>> According to its 2002 federal tax statement, the most recent available,
>> the
>> Coalition for Free Trade spent more than $1.1 million between 1998 and
>> 2001.
>> It is seeking an additional $700,000 in donations, according to W. Reed
>> Foster, its president.
>>
>> In the wine industry, Jackson's decision to back litigation was seen as
>> risky and, by some, as courageous. Many other winemakers feared
>> retaliation
>> from wholesalers.
>>
>> The biggest name in the wine business publicly supported the Indiana
>> state
>> law at the 7th Circuit. E.&J. Gallo Winery, with an estimated $3 billion
>> per
>> year in retail sales, according to MKF Group, filed a friend-of-the-court
>> brief defending the statute -- a move that was widely seen as a
>> reflection
>> of Gallo's good relationships with the wholesalers.
>>
>> Gallo has filed no other briefs. Asked the company's position on the
>> Supreme
>> Court case -- Granholm v. Heald, MI Beer & Wine Wholesalers v. Heald and
>> Swedenburg v. Kelly, 03-1116, 03-1120 and 03-1274 -- Gallo spokesman John
>> Segale said: "We believe this is an issue that needs to be resolved by
>> the
>> court, and we will live with whatever decision they reach."
>>
>> A strong-willed lawyer with a libertarian streak, Jackson started
>> Kendall-Jackson 22 years ago, building an empire out of sweet Chardonnay.
>> Although Forbes estimated the company's sales at $450 million in 2003,
>> Jackson empathizes with smaller winemakers, associates said.
>>
>> Also, Jackson had already fought and beaten a powerful Midwest
>> wholesaler,
>> Judge & Dolph, in an unrelated federal case. Judge & Dolph is controlled
>> by
>> William W. Wirtz, who also owns the Chicago Blackhawks hockey team and
>> Chicago's United Center.
>>
>> Jackson "does what's good for the company, and direct shipping is good
>> for
>> the company. He's not afraid of anybody," coalition president Foster
>> said.
>>
>>
>> http://www.washingtonpost.com/wp-dyn...-2004Dec4.html
>>
>>
>
>

"graham lowe" > wrote in message
...
>I run www.cleanskins.com in Australia. We sell unlabelled "cleanskin" wines
>from wineries direct to public - online. We only deliver to Australian
>Addresses at this stage. I am very interested in the progress of this case.
>
> What is the likely outcome ??

The likely outcome seems to be in favor of the small wineries who wish to
sell directly to customers in other states without having to go through
wholesalers.

That isn't going to do you any good at all though, since international sales
barriers will remain as they are now.

Tom S

"graham lowe" > wrote in message
...
>I run www.cleanskins.com in Australia. We sell unlabelled "cleanskin" wines
>from wineries direct to public - online. We only deliver to Australian
>Addresses at this stage. I am very interested in the progress of this case.
>
> What is the likely outcome ??

The likely outcome seems to be in favor of the small wineries who wish to
sell directly to customers in other states without having to go through
wholesalers.

That isn't going to do you any good at all though, since international sales
barriers will remain as they are now.

Tom S